New Greek government faces first test

November 17, 2011 10:24 am

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By AGENCE FRANCE PRESSE, Greek Finance Minister Evangelos Venizelos sits at the parliament/AFPATHENS, Nov 17 – Less than 24 hours after being confirmed in parliament, Greece’s new government faces a test of public opinion Thursday when thousands are expected on the streets for anti-austerity protests.

Demonstrators are set to gather in Athens for a march marking the anniversary of a 1973 uprising that was brutally repressed by the military government, but which last year morphed into a protest against reforms introduced to tackle Greece’s debt crisis.

Police are braced for trouble, deploying 7,000 officers for the protest, including about 700 riot police equipped with tear gas, shields and batons.

Late on Wednesday, the new unity government led by Lucas Papademos, comprising socialist, conservative and far-right nationalist parties, overwhelmingly won a vote of confidence in parliament with 255 votes to 38.

Papademos, a former vice-president of the European Central Bank, took over on Friday following days of political and market turmoil over Greece’s huge debts, which sparked fears it may have to leave the eurozone.

He is now under pressure to implement deeply unpopular austerity measures and structural reforms demanded by Greece’s European Union and International Monetary Fund creditors in return for two bailout deals.

Papademos must secure the latest installment of a 2010 bailout to avert bankruptcy by mid-December, and enforce reforms agreed as part of a second rescue deal agreed last month.

He took the first steps towards writing off a large chunk of Greece’s 350-billion-euro debt on Wednesday night when he held talks with Charles Dallara, the managing director of the Institute of International Finance.

Dallara, who also met with Finance Minister Evangelos Venizelos, is leading negotiations on a major Greek debt rollover agreed as part of last month’s deal.

He and Venizelos discussed the eurozone package and “in particular the participation of private creditors”, a finance ministry source said.

Greek daily Kathimerini reported that “no deal” had emerged on Wednesday after a first round of talks in Athens between officials and Dallara.

The head of the Greek debt management agency said Greece was “seeking a formula” in talks with creditor banks on Thursday on details of how they will take their losses in rolling over maturing bonds so the country can sustain its huge debt.

“We are seeking a formula, the talks are ongoing…a solution is needed that guarantees the greatest (creditor) participation possible,” PDMA chief Petros Christodoulou told AFP by telephone from London where he was briefing investors.

“Each investor has different needs, French banks may want one thing and other banks another, we need a synthesis,” Christodoulou said.

The banks have agreed to accept a 50 percent writedown on Greek debt as part of a rescue plan which also gives Athens 100 billion euros in loans and 30 billion to recapitalise its banks.

But the details of the so-called “haircuts” must still be hammered out, and Dallara will now head to Frankfurt for talks with financial institutions.

Addressing parliament shortly before the confidence vote, Papademos warned against raising expectations of what his government can achieve, with its coalition members angling for elections within a few months.

But he expressed optimism that the eurozone could overcome its current problems and insisted: “It is up to us to apply the necessary policies so that when the eurozone recovers from the crisis, Greece will still be in the euro.”

Brussels increased the pressure on Athens on Wednesday to commit itself in writing to the measures required by its foreign creditors, a move which two parties within the governing coalition have so far resisted.

Jean-Claude Juncker, who heads the group of eurozone finance ministers, said it would discuss before the end of November whether to release eight billion euros in frozen funds from a first rescue deal agreed in May 2010.

Greece needs the money before state coffers run dry on December 15.

“We are waiting for a letter from the Greek prime minister on the precise intentions of authorities regarding the recommendations made” last month, Juncker told the European parliament in Strasbourg, France.

Thursday’s demonstration will begin at a university in the centre of the city where the uprising took place 38 years ago. It was brutally repressed by the army dictatorship and at least 44 people died, but the junta fell the following year.

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